Markets nervous ahead of Fed decisions

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news both equity and bond markets are displaying some nerves ahead of tomorrow's US Fed rate and policy decisions.But first, there was another dairy auction overnight and a good gain was achieved even if not as strong as some market forecasts expected. Overall prices were up +4.6% in US dollar terms on top of the prior event's +2.7%. In NZD terms the increase was a lesser +3.7%. WMP rose +4.6% from the last event, SMP was up +5.4% and butter up +3.8%. But cheddar cheese fell -1.7%. These are positive signals and momentum going into tomorrow's Fonterra result announcements, but we need to keep in mind even after these rises, overall prices are still -24% lower than year-ago levels and the recent rises only take them back to early August levels. This event is a positive sign, but will hardly move the needle on milk payout forecasts. More here.In the US, residential building consents rose rather sharply in August, but housing starts fell sharply, and it is the falling starts data that is getting all the headlines. With more applications to build being approved, the fall in housing starts might be just temporary.US retail sales at brick & mortar stores on a same store basis were up +3.6% last week from a year ago, good, but really only enough to keep pace with inflation.Meanwhile, Canadian CPI inflation rose to +4% in August from +3.3% in July, overshooting market expectations of +3.8%. Rents and petrol are getting the blame. Their central bank has said inflation at these levels is inconsistent with their targets. That will raise expectations for more rate hikes there.Separately, we should keep an eye on how relations between Canada and India develop, after Canada said it had direct evidence the Indian Government assassinated an opponent in Vancouver, Canada. US evidence in the link is a key component. India's embarrassment will likely result in extended anti-Canada and anti-US reactions.In China there is a massive exit underway by investors. Official data shows holdings by foreigners of Chinese equities and bonds has now fallen by more than -NZ$330 bln from the peak in December 2021 until August this year when -NZ$20 bln left in that month alone. Those with direct, on the ground investments in China are growing less optimistic too.The OECD is out with its updated global growth forecasts. It